The Canadian stock market could be volatile in 2025. Tariffs, wars, and economic and political uncertainty could all play havoc with the market. With weakening economic data, Canada may already be in a recession (even despite the TSX Index hitting recent all-time highs).
If you want to be a little more defensive in this environment, there are plenty of options in Canada. Here are three recession-resilient stocks for investors seeking extra safety right now.
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A compounding consumer staple stock
Dollarama (TSX:DOL) has been a foolproof investment for the past decade. Its stock is up 322% in the past five years and 800% in the past 10 years. The company has demonstrated exceptional execution of its growth strategy.
It provides everyday essentials to consumers at a reasonable price (or so it is perceived). Often, I find myself going to Dollarama to buy one thing and shortly end up with a full cart of other stuff. It has a similar consumer appeal to other great retailers like Costco.
Dollarama has grown revenues by an 11% compounded annual growth rate (CAGR) in the past five years. Yet, earnings per share have risen by a 20% CAGR. This indicates the company has substantial operating leverage as it scales.
Dollarama continues to see strong growth from its joint venture in Latin America. Canada continues to provide single-digit growth opportunities. A recent acquisition in Australia could further bolster growth prospects.
The biggest risk to this stock is its valuation. It trades at an elevated 40 times earnings multiple. The market certainly gives it a vote of confidence for its strong execution and stable business model. If you want to be extra cautious, it is best to buy this stock on temporary dips.
A top Canadian tech company
Another great stock for recession-resilience is Constellation Software (TSX:CSU). It has nearly 1,000 software operating businesses under its umbrella. These businesses operate in a wide mix of sectors, industries, and geographies.
Owning Constellation is like owning a whole bunch of quality micro-cap tech stocks. It provides considerable diversification, offsetting the risk from any one industry or country.
Its niche software applications are generally considered quintessential to the customers it serves. Constellation can buy these niche software businesses at attractive valuations. It then optimizes their operations to generate strong free cash flows. That cash gets reinvested into more acquisitions.
Constellation has grown revenues by a 23% CAGR in the past five years. Earnings per share have risen by a 17% CAGR.
Like Dollarama, Constellation is not a cheap stock. However, the company has a wonderful record of outperforming. Buy it on dips and you should continue to profit from its strong execution.
A top utility stock for steady income
If you want to go extremely boring and recession-proof, Fortis (TSX:FTS) is quintessential. It has a North America-wide regulated utility platform. Most of its assets are transmission and distribution. These are considered some of the safest assets a utility can own.
Fortis has grown revenues and earnings per share by, respectively, 7% and 8% CAGRs in the past 10 years. The company is not growing quickly. It aims for a 5–7% annual rate base growth. Yet, its stable business model is attractive in times of volatility.
If you want safe and secure income, this is one of the best. FTS stock has a 51-year track record of increasing its dividend. It yields 3.7%. Like the stocks above, it is not cheap today. Yet, you pay up for the quality of the business and the certainty of the dividend.
